Report: Rents rise dramatically, pushing out poor tenants

CITYWIDE — Rents are the highest they’ve ever been for rent-controlled units in Santa Monica, making the city by the sea an increasingly inaccessible place for many people, according to a report released by Santa Monica Rent Control this week.

Studio apartments in the city rented between 2010 and 2012 ranged between $1,000 per month and $1,295, depending on where in the city they were located. Three-bedroom apartments exceeded $3,100 in some areas, according to the report.

It shows what many have long known — rents in the city are on the rise at a time when traditional mechanisms for constructing affordable housing are increasingly scarce.

The culprit, in the eyes of the report’s authors, is vacancy decontrol, a product of the 1995 Costa-Hawkins Act which allows owners to raise rents on apartments to market value when a rent-controlled tenant moves out of the unit.

Although the rents rise only by percentages after that, market rents in Santa Monica have gotten so high that many people cannot afford them.

Since 1999, when Costa-Hawkins took full effect, 63 percent of the 28,180 rental units in Santa Monica that fall under rent control law have been rented at market rate, according to the report.

By 2031, the report estimates that all such rental units will have been brought to market rent at least once.

The report also poses a question: Can a middle-class household afford to move here paying market-rate rents?

“The short answer is no, at least not comfortably,” the report reads.

Standards established by the U.S. Department of Housing and Urban Development dictate that renters who pay more than 30 percent of their gross income on rent are considered “rent-burdened.”

Under that definition, a household would have to make just under $102,000 per year to afford a three-bedroom apartment in Santa Monica, and roughly $88,630 to get a two-bedroom and still remain under the HUD guidelines.

As of 2010, 48 percent of renters in Santa Monica paid more than 30 percent of their income on housing, compared to only 37 percent in 2000.

In that same time period, 22 percent of families and individuals making less than $75,000 have left the city, while higher income categories have increased.

The loss of low-income families would have been even more significant if not for attempts by City Hall to maintain local diversity by pumping resources into the production of affordable housing, according to the report.

People are also coming and going quickly — half of existing tenancies in market-rate units started in the past four years, and roughly 20 percent of new tenancies lasted only a year.

That’s not encouraging to Patricia Hoffman, the co-chair of Santa Monicans for Renters’ Rights, or SMRR, and advocate for affordable housing.

“One of the things (the report) says over and over again is how frequently apartments turn over,” Hoffman said. “It takes a lot of the stability out of the community where people are committed to local issues like schools and the environment.”

Wesley Wellman, who represents the interests of local landlords as president of the Action Apartment Association, feels that lack of “stability” refers to the SMRR’s voter base rather than apartment dwellers at large.

Wellman holds a dim view of the report, calling it part of a political campaign to discredit the Costa-Hawkins Act “by appealing to sympathies that people of good will have toward the less fortunate.”

It includes none of the positive impacts that he says have resulted from vacancy decontrol nor negatives of rent control, which he believes became a safe haven for the well off.

“From 1979 to 1999, legislating low rents did not create apartments for moderate-income persons,” Wellman said. “It only established bargain rents for the affluent.”

Rather than pushing lower-income households out of Santa Monica, Wellman believes it has invited more people in by encouraging an increasing number of renters per unit and therefore dividing the cost of renting amongst more people.

“It’s a better utilization of the housing stock,” Wellman said. “There are more people living here than ever before, without building any new units.”

He also argues that affluence has its perks, many of which are enjoyed by the same people arguing for rent control including money pouring into the municipal General Fund to support police, firemen and keep roads in good shape.

The economics of rent control are difficult at best.

A 2000 study by Kaushik Basu and Patrick Emerson of Cornell University suggests that abolishing rent control like that practiced in Santa Monica would result in an across-the-board decrease in rents.

A 1998 article in The Economist, on the other hand, reported that when a strict form of rent control ended in Massachusetts, the racial and economic diversity in Cambridge, Mass. declined sharply and the population became more transient.

Investment in housing and repairs, however, went up.

That diversity is important to Santa Monica, not only to foster intangibles like tolerance and understanding, but to meet the city’s job needs and sustainability goals, Hoffman said.

“We want to have a mixture of economic diversity in our community so that we can have people who work in all capacities and we can fill the jobs we need,” Hoffman said. “We need teachers and firemen, but of course it’s nice to have doctors too.”